Partners, Volume 13, Number 3, 2003

Impact of the 2000 Census Data on the CDBG Program

At a time when local governments are struggling with budget shortfalls, funding from the department of Housing and Urban Development’s (HUD) Community Development Block Grant (CDBG) program, a stalwart to community development and neighborhood revitalization initiatives, has declined.

When the impact of inflation is considered, HUD support has dropped by 12 percent since 1993. The drop in real funding dollars along with the effects of changing allocations in response to 2000 census data may impede development in some older communities.

Allocation of funds for CDBG programs is based on two formulas. The first formula, originally established in the authorizing legislation of 1974, considers three variables: population is weighted at 25 percent, poverty at 50 percent and overcrowding at 25 percent. The formula weighed poverty heavily to reflect the program’s intent to serve low-income communities. After enactment of the law, HUD analysis showed that although this formula addressed communities with large poverty populations, it did not capture the needs of older and declining communities.

In 1977 Congress responded to this analysis by enacting legislation to create a dual formula that would target funds for both types of communities. This dual formula (formula A and formula B) has been utilized since 1978. Formula B added three variables: (1) growth lag (the shortfall in population that a city or county has experienced if its current population is compared to the population predicted by the overall growth rate of metropolitan cities since 1960) is weighted at 20 percent; (2) poverty, at 30 percent; and (3) housing built before 1940, at 50 percent.

FY 2002 Formula Variables and Weights

Formula A
Factors

Weight

Formula B
Factors

Weight

Population

20%

Growth Lag*

20%

Poverty

50%

Poverty

30%

Overcrowding

25%

Pre-1940 housing

50%

* In the state allocation, population is used in place of growth lag.

Under the 1977 legislation, grants are determined for each jurisdiction by both formulas; a jurisdiction automatically receives funds from the formula that generates the higher amount.

What the 2000 census implies for CDBG funding levels

According to the HUD study, new 2000 census data for poverty, overcrowding and pre-1940 housing have had the following impact on the redistribution of CDBG funds:

•Of the state grantees, 14 percent gained 10 percent or more CDBG funding, and 8 percent lost 10 percent or more.

This redistribution of funds is the result of changes in entitlement communities’ share of persons in poverty and overcrowding. Overall, central cities throughout the country lost funds, while suburban cities and urban counties experienced funding increases.

HUD study results for the 1,024 entitlement communities in 2002, based on the combined effects of changing all of the census variables from 1990 to 2000 and adding 135 new entitlement communities between 1993 and 2002, are as follows:

Of the 1,024 entitlement communities in 2002, 29 percent were significant gainers. These include the 135 new entitlement communities since 1993 (13 percent) and the 16 percent of existing entitlement communities that gained more than 10 percent in CDBG funding.

Significant losers among the entitlement communities were the 21 percent who lost more than 10 percent in CDBG funding.

In the Sixth District, Florida and Georgia posted net increases in funding, including gaining new entitlement communities. The remaining four states, Alabama, Louisiana, Mississippi and Tennessee, saw net losses in CDBG funding.

Shifting resources from older to newer communities

Ten-year data from the 2000 census for poverty, overcrowded housing, and, to a lesser extent, pre-1940 housing and population have resulted in a shift in allocations under the CDBG dual formula, as it did with both the 1980 and 1990 census data. The new data have not only affected the formula factors but also introduced CDBG grants to new entitlement communities and new metropolitan areas.

Overall, the impact of applying new data to the formula has been to reduce the share for older, declining entitlement communities funded under formula B and to increase the amount that goes to newer, growing communities funded under formula A. This shift could prove problematic to older, core cities already faced with declining revenues and a shrinking tax base in their urban neighborhoods.

It remains to be seen whether this shift of resources will address the targeted needs of the low- and moderate-income neighborhoods and persons that CDBGs serve. What is clear is that local governments must continue to develop and utilize innovative tools and resources from both public and private sources to assist their low-income citizens and neighborhoods.

Endnote

1. Central cities of metropolitan statistical areas (MSAs); other metropolitan cities with populations of at least 50,000; and qualified urban counties with populations of at least 200,000 (excluding the population of entitled cities) are entitled to receive annual CDBG grants.

By Janet Hamer, regional community development manager in the Atlanta Fed’s Jacksonville Branch.

Impact of 2000 Census on Nonentitlement and
Entitlement Grantees Combined